You Can't Rely on This 6.5% Yielder

This company's dividend is not sustainable. And management knows it. [Shield] AN OXFORD CLUB PUBLICATION [Wealthy Retirement]( [View in browser]( SPONSORED [$30 Trillion Debt Bill Is Now Due]( [Big bomb of money]( For decades... politicians have racked up huge debt with no thought of the future. Now... the bill is due. It's unleashed a financial storm called "America's Reckoning"... [Discover Why You Must Prepare Before November 4 (CLICK HERE)]( [SAFETY NET]( [You Can't Rely on This 6.5% Yielder]( [Marc Lichtenfeld, Chief Income Strategist, The Oxford Club]( [Marc Lichtenfeld]( I wish I had better news for Southern Copper (NYSE: SCCO) investors who enjoy their big dividend payments. But those investors have already been trained by the company's management not to expect to continue to receive those same large dividends year after year. There are two main problems, and free cash flow is one of them. After steady growth for the past few years, free cash flow at the mining company is projected to get cut in half this year, falling to $1.7 billion from $3.4 billion in 2021. Next year, free cash flow is forecast to be flat, at $1.7 billion again. [Chart: Southern Copper Free Cash Flow]( Declining free cash flow is an issue, but it gets even more serious when it no longer covers the dividend. In 2021, Southern Copper paid out $2.5 billion in dividends, or 74% of the company's free cash flow. I look for a payout ratio of 75% or lower, so it was at the upper limit of what I want to see. SPONSORED [Wall Street Legend Warns "Financial Reset" is Coming]( Man who predicted 2022 crash warns 8.4 million Americans to get out of banks and into [a new vehicle 50 years in the making](. This year, however, the payout ratio is projected to be 165%. So for every $1 of free cash flow, the company is paying out $1.65. That's not sustainable. And management knows this. The company already slashed the dividend in August to $0.75 per share from $1.25. In fact, Southern Copper has cut the dividend six times since 2013. The current $0.75 per share dividend comes out to $2.3 billion in payouts annualized. If free cash flow doesn't improve quickly in 2023, another dividend cut is very likely. Dividend Safety Rating: F [Dividend Grade Guide]( Let me know if you have a stock whose dividend safety you'd like me to cover next by typing the ticker in the [comments]( section. But before you do, please check to see whether I've written about your favorite stock recently. There's a good chance I have. To see whether I have written about your favorite stock, click on "Search" at the top right part of the [Wealthy Retirement homepage]( type the company name in the box and hit enter. Boom, you'll see all the recent articles that mention your stock. Good investing, Marc [Leave a Comment]( RECOMMENDED LINKS [This Company Just Solved Europe's Energy Crisis... 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